ATS stock wins price target raise at Scotia

Ahead of the company’s third quarter financials, due February 7, Scotia Capital analyst Michael Doumet has raised his price target on ATS Corp (ATS Corp Stock Quote, Chart, News, Analysts, Financials TSX:ATS).

As reported by the Globe and Mail, the analyst January 25 maintained his “Sector Outperform” rating and raised his one-year price target on ATS from $61.00 to $64.00.

““We are ahead of consensus for 3QF24 — and also expect upside to 4QF24 (i.e., we expect ATS’s 4QF24 revenue guidance [provided with 3Q results] will also be a positive surprise),” Doumet wrote. “In essence, what we expect in the next two quarters is the “best” from both Transportation and Life Sciences: Transportation sales should approach their near-term top (as revenue burn with its large customer reaches a high) and Life Sciences sales should rise from higher auto-injector contributions. Similar to last quarter, we think the risk is to the backlog, which we expect to moderate given the high revenue burn.”

The analyst gave his take on the stock’s valuation.

“ATS trades at 13.5 times on our F25E — expanding from 10.0x following its 2QF24 earnings release — and now trades closer to its three-year average,” he added. “Since early November, 10-year rates have eased and the probability of an economic soft landing has increased, raising the prospects of continued healthy organic growth (despite slowing EV orders). Last quarter, ATS was also able to demonstrate an ability to backfill Transportation orders with Life Sciences (we think that is less likely in 3QF24).”

At press time, shares of ATS were up 2.1 per cent to $58.85.